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I am just looking for someone to confirm my answers to these questions: 1. Assume that...

I am just looking for someone to confirm my answers to these questions:

1. Assume that the economy is in long-run equilibrium, then the price of fuel decreases. What happens to GDP, price level, and unemployment?

      I got the price will decrease, unemployment will decrease, and gdp will increase

2. Asumme that the economy is in long-run equilibrium, then the DOW jones stock market increases. What happens to GDP, price level, and unemployment?

      Since its a shift in AD its basically the opposite...I got GDP will increase, Price level will increase, and unemployment will decrease.

3. Which type of unemployment do the situations exemplify?

   A. Import competition causes Bob to get laid off. (Structural)

   B. Elizabeth graduates from college but has not found a job at the current time. (Frictional)

Thank you guys!

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Answer #1

All the answers are correct.

1. A decrease in fuel price decreases cost of production and increases aggregate supply, This shifts AS curve to right. price will decrease, unemployment will decrease, and gdp will increase

2. Increase in stock market increases consumer income and thus consumer and aggregate demand. AD curve shifts to right.GDP will increase, Price level will increase, and unemployment will decrease.

3. a. Structural is due to change in the structure of the economy.

b. While frictional is due to job switch.

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